The Lucy Rose Clinic

[2021] FWC 1515

[2021] FWC 1515

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.120 - Application to vary redundancy pay for other employment or incapacity to pay

The Lucy Rose Clinic
(C2020/5971)

COMMISSIONER CAMBRIDGE SYDNEY, 26 MARCH 2021

Variation of redundancy pay.

[1] This Decision is made in respect of an application taken under s. 120 of the Fair Work Act 2009 (the Act). The application was lodged with the Fair Work Commission (the Commission) at Sydney on 31 July 2020.The application indicated that it was made by The Lucy Rose Clinic trading as The Lucy Rose Holdings Pty Ltd,and the application included an ABN: 84 953 817 959.

[2] However, material that has subsequently been provided to the Commission has indicated that the ABN nominated in the application document (84 953 817 959) is that for an entity named as The Trustee for the Lucy Rose Clinic Unit Trust (LRCUT). The LRCUT is one of a number of Australian and New Zealand registered Companies which appear to be related entities of inter alia, The Lucy Rose Holdings Pty Ltd (LRH) which has an ABN of 78 600 418 264. For the purposes of this Decision, the application will be considered to have been made by LRH trading as The Lucy Rose Clinic (the employer).

[3] The application seeks a determination of the Commission to reduce the amount of redundancy pay that would otherwise represent an entitlement derived from s. 119 of the Act and payable to Diana Panrucker (the employee). The application seeks to reduce the employee’s redundancy entitlement from 6 weeks’ pay to nil. The reduction to the employee’s redundancy entitlement has been advanced on the basis that the employer is not able to pay the redundancy entitlement of 6 weeks.

[4] On 20 August 2020, the matter was the subject of a Mention and Directions proceeding conducted by the Commission via telephone. At the proceedings held on 20 August, Ms Meredith Bell the employer’s Operations Manager, represented the employer, and the employee represented herself. During the proceedings held on 20 August, it became apparent that an issue about whether the employer was a small business required clarification. Ms Bell was provided with an opportunity to consider the issue of whether the applicant employer was indeed a small business employer, and to subsequently advise whether the employer intended to continue the application if it was, as was asserted, a small business.

[5] Subsequently, by way of an email sent on 2 September 2020, Ms Bell advised that the employer would not continue to assert that it was a small business employer, and that it wished to proceed with the application. A further Mention and Directions proceeding was held via telephone on 25 September 2020. On 28 September 2020, the Commission issued Directions for the Parties to file and serve their respective documentary cases in accordance with a timetable that concluded with the Parties providing advice as to whether either Party sought a Hearing of the matter, or alternatively, if the respective Parties were content for the matter to be determined upon the filed documentary material.

[6] On 9 November 2020, the Commission issued amended Directions which were necessitated by an unresolved issue concerning confidentiality that the employer required in respect to commercially sensitive financial information that was to be included in its documentary material. The amended Directions anticipated that in the absence of any confidentiality agreement between the Parties, the employer would file unredacted material and serve redacted versions of the relevant documentation on the employee.

[7] In due course, the Parties filed material in accordance with the amended Directions and subsequently they each confirmed that they were content for the application to be determined by way of analysis and consideration of the filed documentary material and without the need for any Hearing.

Relevant Factual Circumstances

[8] The employment of the employee ceased on 3 April 2020. The employment of the employee was covered by the terms of the Health Professionals and Support Services Award 2020 [MA000027]. At the time of the termination of employment, the employer provided the employee with payment in respect of 3 weeks’ notice as stipulated in s. 117 of the Act, together with payment in respect of her accrued annual leave.

[9] Initially, the employer asserted that the employee was not entitled to any redundancy pay because it was a small business employer and excluded from any obligation to pay redundancy pay by virtue of s. 121 of the Act. However, following further consideration of the meaning of small business employer as contained in s. 23 of the Act, the employer came to the realisation that it was not excluded by virtue of s. 121 of the Act from an obligation to pay redundancy pay to the employee.

[10] Consequently, the employer advanced the application taken under s. 120 of the Act, seeking a variation of the redundancy pay that the employee was entitled to receive on the basis that, in accordance with subsection 120 (1) (b) (ii) of the Act, it could not pay the amount of redundancy pay, and it sought to have that amount reduced from 6 weeks to nil.

Consideration

[11] In this instance the application made by the employer to have the Commission make a determination to reduce the redundancy pay which the employee was entitled to receive under s. 119 of the Act, was advanced on the basis that the employer was not able to pay the redundancy entitlement. Consequently, the matter for determination by the Commission involves the question as to whether the employer has established incapacity to pay the redundancy entitlement.

[12] Established incapacity to pay is one basis for variation of redundancy pay provided for in s. 120 of the Act. Section 120 of the Act is in the following terms:

“120 Variation of redundancy pay for other employment or incapacity to pay

(1) This section applies if:

(a) an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and

(b) the employer:

(i) obtains other acceptable employment for the employee; or

(ii) cannot pay the amount.

(2) On application by the employer, the FWC may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that the FWC considers appropriate.

(3) The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination.”

[13] Consequently, the application in this instance has been made on the basis that there is satisfaction of subsection 120 (1) (b) (ii) of the Act. In this regard, the onus is on the employer to prove that it cannot pay the amount of redundancy pay to which the employee is entitled to under s. 119 of the Act.

[14] In support of the application, the employer provided documentary material including two affidavits of Ms Bell, respectively dated 23 October and 23 November 2020, together with submission materials including numerous attachments. The employer’s submissions with attachments, were provided on 26 October 2020, and its response submissions with further attachments, were dated 8 January 2021.

[15] In summary, the material provided by the employer was said to have demonstrated that it did not have the financial means to pay the redundancy entitlement to the employee. In particular, Ms Bell stated that “… the Company would likely become insolvent” if it paid the employee “a redundancy”. The materials provided by the employer included various financial documents (the financial documents) which were prepared by the employer’s accountants/bookkeepers. The financial documents included an undated statement from Anita Hutchinson (the Hutchinson statement) that was attached to the affidavit of Ms Bell dated 23 October 2020, and an email dated 28 December 2020, from Peter Masonwells (the Masonwells email). The employer requested that the financial documents remain confidential.

[16] The Commission has examined the financial documents and considered all of the submissions and other material provided by the employer. Without revealing the detail of the financial position of the employer, the financial documents confirm that the employer has experienced and continues to face, certain financial difficulties. However, the financial documents and all other material provided by the employer, has not established that the employer cannot pay the redundancy amount. In particular, it is relevant to note that neither the Hutchinson statement nor the Masonwells email, provided any confirmation or other indication of the likely insolvency of the employer as was asserted by Ms Bell.

[17] The financial documents confirm that it is not the case that the employer cannot pay the redundancy amount to which the employee is entitled. Payment of the full entitlement by instalment may have represented a reasonable and sensible accommodation of the employer’s financial circumstances. However, subsection 120 (2) of the Act provides that the Commission may determine that the amount of redundancy pay is reduced to a specified amount. The Act does not provide for the Commission to vary redundancy pay in any manner other than that prescribed by subsection 120 (2).

[18] Consequently, the Commission does not have the power to determine payment of a redundancy entitlement by way of instalments. The Commission is constrained to make a determination that reduces the redundancy pay to a specified amount and it can only do so in circumstances where it has been established that the employer cannot pay the amount (or if the employer obtains other acceptable employment for the employee).

[19] In this case, the employer has not established that it cannot pay the redundancy entitlement of the employee. The employer will probably have some difficulty in making that payment, and it is to some extent, regrettable that the Commission does not have the power to make a determination that would involve payment of that amount by way of instalments. However, there has been a significant delay since the termination of the employment, and this delay would provide some alleviation of the impact of payment on the financial position of the employer.

[20] In conclusion, the employer has not established that it cannot pay the full amount of the redundancy entitlement due to the employee. Therefore the application has not satisfied the requirements of subsection 120 (1) (b) (ii) of the Act. The employee is entitled to the redundancy pay equivalent to 6 weeks remuneration, and the Commission is not empowered to provide for payment of that amount by way of instalments.

[21] The application has not satisfied the requirements of subsection 120 (1) (b) (ii) of the Act and the application is dismissed accordingly. An Order dismissing the application will be issued separately.

COMMISSIONER

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